Price of oil drops on uncertainty about whether US leaders can avoid fiscal cliff

The price of oil fell slightly on Nov. 12. (file image)

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By Sandy Shore, The Associated Press
Published Monday, November 12, 2012 3:46PM CST

The price of oil fell slightly Monday as global economic news took a back seat to uncertainty about the looming fiscal cliff in the U.S.

A combination of tax hikes and government spending cuts will take effect Jan. 1 unless President Barack Obama and Congress can reach a compromise to avert it. Economists believe the impact of the fiscal cliff could hurt growth in the world's largest economy.

Benchmark oil fell 50 cents to settle at $85.57 per barrel on the New York Mercantile Exchange. Brent crude, which is used to price international varieties of oil, dropped 33 cents to finish at $109.07 per barrel in London.

Meanwhile, China's export growth picked up in October, which is another sign of improvement in its economy. That could help support demand for oil and other commodities.

But Japan's economy contracted in the latest quarter, which could indicate that it may be in a recession like many European countries.

Most traders, however, are focused on the U.S. budget issues. "That's going to start to really become the primary driver in the market in the next month," said Gene McGillian, an oil analyst at Tradition Energy.